The Good Old Days Are Now

Forget what you've heard about "working harder and getting less." Most Americans have both more leisure and better goods than they did 20 years ago.

W. Michael Cox & Richard Alm from the December 1995 issue

Draw a six-inch line on a piece of paper. Make a dot at the right end, and label it Knowledge. Make another dot two inches from the line's other end. Label that point Ignorance. What's to the left of that dot might be called Mythology. It's what we think we know but what isn't really so.

Often the biggest stumbling block to accurate perceptions of our world is getting beyond the glib notions that nearly everyone takes for granted. We spend an awful lot of time stumbling about in the realm of mythology:

· U.S. living standards are falling, and Americans aren't as well off as they were 25 years ago.

· These days, it requires two workers for a typical family to maintain a middle-class lifestyle.

· Today's children are likely to become the first generation that won't live as well as their parents.

· The United States, once the world's undisputed leader, is falling behind as other nations grow faster.

These are the myths that plague discussion of what's happening to U.S. living standards. They have been repeated so often, and by such respected authorities, that few Americans even question the proposition that the economy is failing them. The message pours out of Washington, where Labor Secretary Robert Reich frets that American workers are getting stiffed by greedy corporations. It's the central theme of leading academics and think tanks, including Ray Marshall at the University of Texas, Frank Levy at the Massachusetts Institute of Technology, and the Progressive Policy Institute in Washington, D.C. Downward mobility has emerged as a staple of big-city newsrooms, where hard-luck stories make good copy.

Anecdotes, of course, can only illustrate, not prove. In good times and bad, individuals and families will move up and down in the social pecking order for a variety of reasons. Making the case, then, for slipping American living standards demands broad-based evidence. More often than not, the negativists point to falling real wages as their smoking gun.

And the trends do seem decidedly grim: After adjusting for inflation, average hourly wages rose by 2.1 percent a year from 1953 to 1973. After that, wages stagnated and then began a long slide, with an average annual decline of 0.8 percent since 1978. (See Figure 1.) If Americans are making less, it stands to reason they're not going to be able to maintain their living standards.

The pessimists bolster their argument with other trends that seem to show lost dynamism: lackluster economic growth, less-than-stellar productivity gains, widening trade deficits, fewer manufacturing jobs, an inability to match the growth rates of Asia's fast-growing nations. All told, these statistics make for a rather bleak view of the U.S. economy. To make matters worse, the country seems plagued by crime, pollution, insecurity, homelessness, cynicism, and a host of other social pathologies always in a downward spiral toward deeper crisis.

In a society that's addicted to hand-wringing, in a country that accentuates the negative, all this gets plenty of repetition. There are problems in these United Statesno doubt about itbut the conclusion that we're not living as well as we once did is pure mythology. There's abundant evidence, easily obtained but largely ignored, showing that economic progress is still on track in the United States. Today's Americans aren't orphans of history. Far from it, they are experiencing what previous generations worked so hard to achieverising living standards.

In fact, Americans never had it so good.

Consuming Confidence

At best, real wages and the other evidence of a faltering economy are indirect barometers of living standards. It's curious that the declinists spend so much time examining a bunch of proxies but can spare so little energy for direct measures of what's been happening to Americans' well-being. The government's statistical mills and industry groups churn out boatloads of num bers, touching on nearly every aspect of American life. The diligent researcher can look up how many cars we own, how many hours we spend on housework, and how many music buffs attend symphony concerts. All that and much more.

Living standards are best measured by what we consume, not by our earnings or income. Looked at this way, the available numbers don't lend any support to the view that the country isn't doing as well as it once did. Comparisons to the early 1970s are particularly relevant. After all, no one doubts that Americans are living better today than they did a century ago, or even 50 years ago. The past quarter century is when the declinists contend the country's living standards started to slip.